Entrepreneurship Under Radical Uncertainty - A Cognitive Perspective on Experimenting in the Unknown
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Entrepreneurs move their venture creation process from an uncertain, unknown future toward somewhat more certain and knowable. To support present actions about future outcomes on this journey, entrepreneurs essentially need to understand what they know and don’t know yet. Individuals, however, are not destined to have a complete awareness of their ignorance. It is precisely unawareness why a certain opportunity has not yet been exploited, but decisions require fast strategies to simplify information and not lose the opportunity. Thus, knowledge only might not naturally advance opportunities. This book provides insights about how entrepreneurs cope with this apparent contradiction. Based on qualitative and experimental insights, the book explores the relevance of knowing what you don’t know with the help of the science of self-awareness. A key point is that thinking about thinking plays an essential role to overcome cognitive barriers to come to logical judgments and decisions.
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In this article, which has an exploratory, conceptual nature, we discuss the challenges for sustainable business model (SBM) practitioners to include a broader range of stakeholders in developing value-creation logic. This is of relevance as it is not clear how the process of enrolling stakeholders to create value unfolds for SBMs. We argue that researchers should be included as key stakeholders and propose using design thinking as an approach for engagement to co-create sustainable business solutions. By incorporating design thinking, researchers and practitioners can collaborate on addressing sustainable problems in their business model to improve mutual understanding about the problem-solution evolution. Including researchers also helps contextualize and align sustainable business model research to design practical testing of solutions. We illustrate this with a model representing the cognitive process of co-creation between researchers and practitioners in SBM design.
This paper contributes to uncovering the role of metacognition in the decision-making process of entrepreneurs. Specifically, we analyze nascent entrepreneurs in their process of start-up development while relying on metacognitive processes. The experiences of a sample of new venture initiatives are explored in two distinct phases, a start-up competition and the subsequent launch of their venture. Following the Gioia protocol, the study contextualizes the process in which social capital reinforces metacognitive processes. This process stimulates nascent entrepreneurs to consider alternatives, such as extending expertise outside the start-up. Moreover, we find that these processes support entrepreneurs and their teams in improving their decision-making processes. The findings support that nascent entrepreneurs rely heavily on the input of others in their start-up creation process, and contribute to new empirical insights about entrepreneurial metacognition. A dynamic model in which these relationships emerge is developed. The study’s results contribute to a better understanding of the antecedents and consequences of metacognitive processes in nascent entrepreneurship.
The disconnect between the effectuation literature and the cognitive bias research creates artificial boundaries to inhibit the development of a more integrated understanding of decision-making in entrepreneurship. We analyze the effect of effectuation vis a vis on the biases of overconfidence and illusion of control. We test the effect in both a field survey with entrepreneurs and an experiment. Unraveling the patterns of relationships between effectuation and biases helps ground the burgeoning effectuation theory to more established cognitive science theories and advance the scholarly understanding of entrepreneurial decision-making.
The purpose of this research study is to examine the status quo bias and reframing interventions among business students in an attempt to understand their role in the students’ entrepreneurial decision making, aiming eventually to find out whether we can affect students’ entrepreneurial thinking by using an educational intervention towards innovation and change adoption. Though these research topics have previously been examined separately and mostly in a non-entrepreneurial context, this research paper aims to integrate them into one laboratory experiment study in an educational context, considering business students at the university. The experimental study is conducted on a sample with more than 200 undergraduate university students in their third or fourth year of studies of the Management study program at the Ss. Cyril and Methodius University in Skopje. Overall, we find that students are significantly biased towards status quo in 7 out of 18 cases, demonstrating a moderate level of status quo bias. The results from the second part of our study evidence a strong effect of the reframing intervention on overcoming the status quo bias. In any case, the research paper adds a unique practical contribution by offering an actual entrepreneurship learning approach, as an intervention towards the innovation and change adoption among students at business schools and universities.
This article develops a typology for making sense of the numerous strands of Austrian (and Austrian-related) economics and demonstrates how this typology can guide organizational entrepreneurship scholars wishing to ground their research in Austrian thought. In the process, not only are existing insights from the history of Austrian economic thought rediscovered, but clearer light is also shed on important perspectives from that tradition that have received less attention in entrepreneurship research. Based on the Austrian concept of entrepreneurial production and its relationship with the core concepts of knowledge and change, the typology yields four perspectives—equilibration, punctuated equilibrium, disequilibration, and punctuated disequilibrium. These perspectives’ different paradigms as used in organizational research are explored, along with their ontological, epistemological, and methodological assumptions. The typology is illustrated with selected empirical examples from organizational research to spotlight the types of questions that contemporary scholars may appropriately ask and answer from each perspective.
Observational learning can debias judgment and decision making. One-shot observational
learning-based training interventions (akin to “hot seating”) can produce reductions in cognitive biases in the laboratory (i.e., anchoring, representativeness, and social projection), and successfully teach a decision rule that increases advice taking in a weight on advice paradigm (i.e., the averaging principle). These interventions improve judgment, rule learning, and advice taking more than practice. We find observational learning-based interventions can be as effective as information-based interventions. Their effects are additive for advice taking, and for accuracy when advice is algorithmically optimized. As found in the organizational learning literature, explicit knowledge transferred through information appears to reduce the stickiness of tacit knowledge transferred through observational learning. Moreover, observational learning appears to be a unique debiasing training strategy, an addition to the four proposed by Fischhoff (1982). We also report new scales measuring individual differences in anchoring, representativeness heuristics, and social projection.
This article explores how artisan entrepreneurs learn to commodify their creative skills into an entrepreneurial business. The purpose of this paper is to highlight specific types of entrepreneurial learning, artisan entrepreneurs with small businesses are using to run their business. This study explores the experiences of 12 artisan entrepreneurs. Qualitative research was carried out with in-depth semi structured interviews with four different categories of artisan entrepreneurs. GIOIA methodology have been used to analyse and present the data. This study reveals that entrepreneurial learning is a natural process, with findings highlighting the different forms of learning used by the entrepreneurs. This study also uncovers the utilization of existing resources and demonstrate the learning process. Furthermore, findings reveal that artisan entrepreneurs scan the environment, create demand, and then transform their craft and skill into a profitable business. The present informational capital brings positive outcomes for the business. Entrepreneurs heavily rely on relational learning by employing strong alliance in work and support group. Informal learning is also an important aspect in artisan entrepreneur’s life to run a successful business. This study’s results contribute to deeper understanding of the importance of entrepreneurial learning among artisan entrepreneurs in emerging economies. The research questions the unique and creative ways of learning by artisan entrepreneurs who have zero knowledge of business. This paper fills a gap in literature i.e. how the potential artisan entrepreneurs utilize their creative social, economic, and personal capital and experience a profitable business from their craft.
This article performs a systematic literature review of the undeniably diverse – and somewhat fragmented – current state of research on the collaborations and internationalization of small and medium-sized enterprises (SMEs). We analyze key works and synthesize them into a framework that conceptually maps key antecedents, mediators, and moderators that influence the internationalization of SMEs. In addition, we highlight limitations of the literature, most notably in terms of theoretical fragmentation; extant theories are deployed and illustrated but rarely extended in a manner that significantly informs subsequent work. At an applied (but related) level, we argue the need for supplementary work that explores the distinct stages of internationalization – and the scope and scale of this process – rather than assuming closure around particular events. With this, we highlight the need for more rigorous and empirically informed explorations of contextual effects that take account of the consequences of developments in the global economic ecosystem.
In many situations, actively engaging in metacognition may improve cognitive achievement and subjective well-being. However, the potential disadvantages of metacognitive engagement are only rarely communicated in metacognition research. In this paper, I outline three ways in which metacognition may reduce cognitive achievement and psychological well-being. First, metacognition may sometimes actively interfere with task performance. Second, the costs of engaging in metacognitive strategies may under certain circumstances outweigh its benefits. Third, metacognitive judgments or feelings involving a negative self-evaluation may detract from psychological well-being. The main contribution of this paper is to integrate findings from different research traditions in order to illustrate the three suggested ways in which metacognition may be unhelpful. An implication of this overview is that although metacognition is most often beneficial to cognitive achievement and subjective well-being, one should bear in mind that it may also have the opposite effect. It is important for researchers and practitioners to take this potential downside of metacognition into account. Practitioners might find it useful to consider the following three questions that relate to my aforementioned claims: Is the nature of the task such that metacognition could interfere with performance? Is the cognitive demand required by the metacognitive strategy disproportionally large compared to its potential usefulness to cognitive achievement? Does metacognition lead to an unhelpful comparison of oneself to others? The same considerations should be kept in mind when researchers and practitioners communicate the potential implications of research findings in metacognition research to audiences within and beyond the research community.
Scholars have examined various aspects of the entrepreneurial mindset, which have provided insights into its attributes, qualities, and operations. However, the different perspectives have led to a diverse array of definitions. With the array of differing definitions, there arises the need to better understand the concept of an entrepreneurial mindset. Therefore, the question remains as to what exactly is the entrepreneurial mindset and how do people tap into it. In examining the literature, we find that three distinct aspects have arisen through the years: the entrepreneurial cognitive aspect—how entrepreneurs use mental models to think; the entrepreneurial behavioral aspect—how entrepreneurs engage or act for opportunities; and the entrepreneurial emotional aspects—what entrepreneurs feel in entrepreneurship. Using those as a basis for our work, we unravel the entrepreneurial mindset by examining deeper into the perspectives and discuss the challenges for implementing it.
Public managers' decisions are affected by cognitive biases. For instance, employees' previous year's performance ratings influence new ratings irrespective of actual performance. Nevertheless, experimental knowledge of public managers' cognitive biases is limited, and debiasing techniques have rarely been studied. Using a survey experiment on 1,221 public managers and employees in the United Kingdom, this research (1) replicates two experiments on anchoring to establish empirical generalization across institutional contexts and (2) tests a consider-the-opposite debiasing technique. The results indicate that anchoring bias replicates in a different institutional context, although effect sizes differ. Furthermore, a low-cost, low-intensity consider-the-opposite technique mitigates anchoring bias in this survey experiment. An exploratory subgroup analysis indicates that the effect of the intervention depends on context. The next step is to test this strategy in real-world settings.
This study describes SME internationalization as a process that combines entrepreneurial and non-entrepreneurial behaviour. We bring in insights from prior literature and use an illustrative case study of an Italian SME to demonstrate the interplay of entrepreneurial and non-entrepreneurial behaviour during the internationalization process. Our study shows that the combination of entrepreneurial and non-entrepreneurial internationalization cannot be fully explained with existing International Entrepreneurship literature or other internationalization theories, as they do not take into account the nonlinear nature of internationalization or explain why the process seems to reach a ‘glass ceiling’ beyond which it does not progress. The study concludes with a conceptual framework providing an alternative explanation. Based on our conceptual reasoning we propose that predominantly non-entrepreneurial internationalization can occur without developing a clearly defined internationalization strategy. Additionally, we argue that low commitment to internationalization prevents capability development and may lead to nonlinear internationalization. Furthermore, we suggest that family involvement may moderate a firm’s international entrepreneurial orientation, consequently leading to more non-entrepreneurial internationalization.
Managerial cognition has a fundamental role in the internationalization of firms. However, there exists no coherent understanding of how prior research has examined and captured the cognitive foundations of internationalization. This paper provides a systematic review of this body of literature. The review identifies three main streams of research that, overall, consists of nine more specific research areas. We show that especially the areas addressing (1) managerial learning, (2) characteristics of upper echelons, (3) intra-organizational perceptions, and (4) external actors’ perceptions provide opportunities for the further advancement of internationalization literature. For harnessing these opportunities, we find that the microfoundational approach could support the empirical examination of the cognitive foundations and would notably contribute to the Uppsala model-based theorization of the firm internationalization process.
Creating new ventures is one of the most central topics to entrepreneurship and is a critical step from which many theories of management, organizational behavior, and strategic management build. Therefore, this review and proposed research agenda is not only relevant to entrepreneurship scholars but also other management scholars who wish to challenge some of the implicit assumptions of their current streams of research and extend the boundaries of their current theories to earlier in the organization’s life. Given that the last systematic review of the topic was published 16 years ago, and that the topic has evolved rapidly over this time, an overview and research outlook are long overdue. From our review, we inductively generated ten sub-topics: (1) Lead founder, (2) Founding team, (3) Social relationships, (4) Cognitions, (5) Emergent organizing, (6) New venture strategy, (7) Organizational emergence, (8) New venture legitimacy, (9) Founder exit, and (10) Entrepreneurial environment. These sub-topics are then organized into three major stages of the entrepreneurial process—co-creating, organizing, and performing. Together, the framework provides a cohesive story of the past and a road map for future research on creating new ventures, focusing on the links connecting these sub-topics.
Scientific discourses about entrepreneurialism have long been dominated by neo-liberal thinking that categorizes it as gender-neutral. The last two decades however have seen entrepreneurship research develop a more nuanced understanding of gender. Taking the recent findings of entrepreneurial belonging (EB) as dynamic and relational as a starting point, this article aims to better understand how women entrepreneurs are affected by the challenges and chances of defining and negotiating the genderedness of EB. The concept of liminality is used as a critical perspective to gain insights on how women entrepreneurs accomplish entrepreneurial belonging in what is considered a predominantly masculine field like STEM (science, technology, engineering, mathematics). Insights into explorative interviews question the need for a linear or static “fixed” approach of (un)doing gender to foster belonging. More precisely, the data reveal that liminal gender states (LGSs) of EB are linked to the situational perception of dissonance between the subjective ideas of womanhood and a disciplinary as well as entrepreneurial masculine normative frame. And indeed, the data indicate that women STEMpreneurs are continuously triggered by the genderedness of their EB as being a state “betwixt and between” normative frames. One the one hand, they feel challenged by the dissonance of LGSs. On the other hand, the interviews also reveal that this challenge turns into an opportunity in situations where LGSs are strategically used to build upon new entrepreneurial routines and roles that foster a state of uniqueness.
The primary objection to debiasing training interventions is a lack of evidence that they transfer to improve decision making in field settings, where reminders of bias are absent. We gave graduate students in three professional programs (N = 290) a one-shot training intervention that reduces confirmation bias in laboratory experiments. Natural variance in the training schedule assigned participants to receive training before or after solving an unannounced business case modeled on the decision to launch the Space Shuttle Challenger. We used case solutions to surreptitiously measure their susceptibility to confirmation bias. Trained participants were 29% less likely to choose the inferior hypothesis-confirming solution than untrained participants. Analysis of case write-ups suggests that a reduction in confirmatory hypothesis testing accounts for their improved decision making in the case. The results provide promising evidence that debiasing training effects transfer to field settings and can improve consequential decisions in professional and private life.
Using an inductive, qualitative approach involving fifty-five entrepreneurs in the Italian craft brew industry we explore the relationship between alternative entrepreneurial logics of action based on effectuation and causation principles and two types of passion – respectively, passion for the product and passion for growth. Our findings suggest entrepreneurs led by a passion for product prioritize decisions made according to the principles of effectuation, while those led by a passion for growth rely predominantly on causal logic. Moreover, such relations do impact the direction pursued by their ventures favouring, in turn, homogenous and heterogeneous strategies. Important practical and theoretical implications to both effectuation theory and passion are drawn from our findings, and possible avenues for future research are depicted.
This conceptual study describes an approach to corporate entrepreneurship using an outsider perspective-learning to think like an outsider. Three propositions using this perspective are examined in the context of offensive and defensive corporate entrepreneurship. The impact of market conditions on entrepreneurship are used as a basis for developing these propositions. Finally, we investigate the factors that have a significant impact on the success of entrepreneurial efforts by the firm. These variables include: processes, values, resources, organizational structure, corporate culture, and leadership. We use examples of how mature corporations have responded, with particular attention to the changes confronted by Research In Motion (RIM).
Research on decision making and aging has shown that some decision-making skills decrease with age. Despite these age-related declines, no study has yet investigated the possibility of promoting improvements in decision-making skills in older adults. The present study was designed to address this gap in literature by examining the efficacy of a metacognitive-strategy decision-making training on practiced and non-practiced tasks. The training was based on the use of specific metacognitive principles and analytical strategies for promoting an analytical mode of thinking in the decision-making process. We examined 66 older adults (M age = 67.52 years, SD = 5.38; age range 60-81) assigned to two training groups: a metacognitive-strategy decision-making training group and an active control group involved in a strategic memory intervention. Both training groups attended four 2-hour training sessions conducted once a week. Results showed that, after intervention, the decision-making training group improved their decision-making skills significantly more than the active control training group. Crucially, the positive effect of the training was evident in both practiced and non-practiced decision-making tasks. This is the first study investigating the efficacy of a decision-making training in older adults based on metacognitive and strategic principles.
Business is dynamic and rapidly changing. Global markets were previously the playing field of multinational corporations (MNCs), while small and medium enterprises (SMEs) were local; however, the removal of imposed barriers, and recent technological advances in manufacturing, transportation and communications have indorsed SMEs and international entrepreneurs (IE) global access. SMEs and IEs are increasingly fueling economic growth and innovation and these trends are presenting both opportunities and challenges to both MNCs and SMEs in the global arena. This review systematically examines comparative SME and IE research, analyzing (after fine tuning) 762 articles published in leading journals from 1992 to September 2018. Our bibliometric and systematic review classifies SME and IE research findings into three echelons: (i) subjects; (ii) theories; and (iii) methods.
Research findings confirm that individuals seek confirmation for their decisions and discount data inconsistent with their beliefs. This confirmation bias—the tendency to trust, remember, and act only on information that supports what an individual already believes—is pernicious and wide-spread and may also contribute to the high failure rate of entrepreneurial ventures because of those biases. The purpose of this paper is to help entrepreneurs be aware of these biases and help them understand that bias can be moderated using System 2 thinking, which is characterized as reasoned, reflective, and conscious.
Entrepreneurship is multifaceted. The purpose of this review is to acknowledge and critically assess the many and varied dependent variables (DVs) of entrepreneurship over the last 17 years. By focusing exclusively on systematically reviewing entrepreneurship’s DVs, this paper maps out, classifies, and provides order to the phenomena that scholars consider part of this self-defined field of research. Using a systematic selection process and an inductive approach to categorization, we offer a meta-framework for organizing entrepreneurship’s DVs. Based on this meta-framework, entrepreneurship involves the (a) initiation, (b) engagement, and (c) performance of entrepreneurial endeavors embedded in (d) environmental conditions, in which an entrepreneurial endeavor is the investment of resources into the pursuit of a potential opportunity. For each category, we offer both a review of the different DVs and opportunities for future research.
Purpose
The purpose of this paper is to explore the concept of metacompetencies in entrepreneurship education through students’ expressions of metacompetencies in their learning processes, aiming to provide assistance embedding metacompetencies in entrepreneurship education.
Design/methodology/approach
The empirical study is based on qualitative data retrieved from students’ reflections throughout the course, and measures the constructs of metacompetencies in parallel with the acquisition of entrepreneurship course outcomes. The phenomenological analysis is coded to apply Bayesian modelling and statistical validation measures to establish interrelations between metacompetency components and conceptual validity.
Findings
Different degrees of appearance of students’ metacompetencies and significant correlations between all three components of metacompetencies are identified. An empirical model of connection between metacompetencies and entrepreneurship education is created, which shows a strong relationship between students’ metacompetencies and changes in attitudes, emotions, intentions and interest towards entrepreneurship.
Practical implications
Practical implications are connected with the entrepreneurship course design, supporting the development of students’ metacompetencies and self-awareness.
Social implications
Social implications bring learners’ physical participation in the courses into the spotlight, influencing students’ attitudes towards entrepreneurship. Enhancing metacompetencies as a tripartite model assures that cognitive, conative and affective aspects of learning are in corresponding change.
Originality/value
This paper provides a step forward from theorising metacompetencies, putting this concept in the middle of practice. The empirical model establishes a direct connection between metacompetencies and entrepreneurship education, demonstrating how students’ awareness creation through metacompetencies influences changes in interest and intention towards entrepreneurship.
Decision-making is usually accompanied by metacognition, through which a decision maker monitors uncertainty regarding a decision and may then consequently revise the decision. These metacognitive processes can occur prior to or in the absence of feedback. However, the neural mechanisms of metacognition remain controversial. One theory proposes an independent neural system for metacognition in the prefrontal cortex (PFC); the other, that metacognitive processes coincide and overlap with the systems used for the decision-making process per se. In this study, we devised a novel “decision–redecision” paradigm to investigate the neural metacognitive processes involved in redecision as compared to the initial decision-making process. The participants underwent a perceptual decision-making task and a rule-based decision-making task during functional magnetic resonance imaging (fMRI). We found that the anterior PFC, including the dorsal anterior cingulate cortex (dACC) and lateral frontopolar cortex (lFPC), were more extensively activated after the initial decision. The dACC activity in redecision positively scaled with decision uncertainty and correlated with individual metacognitive uncertainty monitoring abilities—commonly occurring in both tasks—indicating that the dACC was specifically involved in decision uncertainty monitoring. In contrast, the lFPC activity seen in redecision processing was scaled with decision uncertainty reduction and correlated with individual accuracy changes—positively in the rule-based decision-making task and negatively in the perceptual decision-making task. Our results show that the lFPC was specifically involved in metacognitive control of decision adjustment and was subject to different control demands of the tasks. Therefore, our findings support that a separate neural system in the PFC is essentially involved in metacognition and further, that functions of the PFC in metacognition are dissociable.
https://link.springer.com/book/10.1007/978-3-319-71782-1
How do people think? By understanding how people think, we can do a better job of explaining their actions. Both of us (the authors) were drawn to this topic in the extreme context of entrepreneurship. This context is extreme because the actions associated with entrepreneurship can have a substantial impact on the individual taking the actions, the economy, communities, the environment, and society as a whole. For example, to explain why one individual creates a venture to benefit the community (Shepherd and Williams 2014) whereas another individual creates a venture that harms the natural environment for personal gain (Shepherd et al. 2013), we need to understand people’s cognitions—what happens in their minds. Not only are the outcomes of entrepreneurial actions extreme (in their impact), but the associated decision making is also extreme—extreme in uncertainty, complexity, time pressure, emotionality, and identity investment. We felt that investigating cognition under such extreme conditions afforded us the opportunity to work—and push forward—the knowledge frontier. That is, we were able to take the existing body of knowledge (from relevant literatures on cognitive science, decision making, and other aspects of psychology) and adapt it, twist it, and blend it to make a new form that would explain entrepreneurial cognition. For example, how do people make decisions in highly uncertain environments—that is, when one does not know the odds of different alternative outcomes occurring (i.e., risk), nor does one even know the possible alternative outcomes because, at this stage, they are not yet knowable? Such decisions typically need to be made quickly (e.g., before the window of opportunity closes) and require substantial investment of cognitive and emotional resources, and the impact of these decisions is highly consequential (e.g., a misstep could lead to failure). The topic of entrepreneurial cognition has fascinated us and motivated our research over the last two decades. Although this research has resulted in publications in the top entrepreneurship, strategy, management, and psychology journals, we thought now would be a good time to pause, reflect on our work, and bring these individual pieces of the puzzle together to provide a cohesive big picture of entrepreneurial cognition. This book is the culmination of our motivation to provide this big picture.
In this study we confirm the often assumed but largely untested belief that entrepreneurs think and behave differently than others. We examine a group of more than 700 nascent entrepreneurs and 400 nonentrepreneurs. We determine the entrepreneurs’ cognitive style propensity for problem solving (Innovator versus Adaptor); we compare their expectations; and, we examine the outcomes (performance and start-up) of their ventures. We find that nascent entrepreneurs are more likely to be overly optimistic Innovators, most people are Adaptors, and oneʼs cognitive style can indeed play a role in the initial development and outcome for the venture, but not always as expected.
How organizations—including Google, StubHub, Airbnb, and Facebook—learn from experiments in a data-driven world. Have you logged into Facebook recently? Searched for something on Google? Chosen a movie on Netflix? If so, you've probably been an unwitting participant in a variety of experiments—also known as randomized controlled trials—designed to test the impact of different online experiences. Once an esoteric tool for academic research, the randomized controlled trial has gone mainstream. No tech company worth its salt (or its share price) would dare make major changes to its platform without first running experiments to understand how they would influence user behavior. In this book, Michael Luca and Max Bazerman explain the importance of experiments for decision making in a data-driven world.
Luca and Bazerman describe the central role experiments play in the tech sector, drawing lessons and best practices from the experiences of such companies as StubHub, Alibaba, and Uber. Successful experiments can save companies money—eBay, for example, discovered how to cut $50 million from its yearly advertising budget—or bring to light something previously ignored, as when Airbnb was forced to confront rampant discrimination by its hosts. Moving beyond tech, Luca and Bazerman consider experimenting for the social good—different ways that govenments are using experiments to influence or “nudge” behavior ranging from voter apathy to school absenteeism. Experiments, they argue, are part of any leader's toolkit. With this book, readers can become part of “the experimental revolution.”
Studies in psychology and behavioral economics have found that decision‐making is replete with cognitive biases. Using examples of time inconsistency, regret, and overconfidence, this article investigates the implications for correcting biases of how they may offset each other. If only some biases are known, even correction of all known biases has ambiguous effects. With costly correction, the presence of some biases may be optimal. Further, if the correct decision is unknown, then the presence of biases does not imply that decision‐making is suboptimal.
This contribution discusses the state of the art of research in International Entrepreneurship. In taking stock of three decades of scientific inquiry in the field, this article also looks ahead, pointing at some future research directions. The latter particularly focus on two aspects: the levels of analysis, individual, organizational and inter-organizational, and the founding constructs of the field, distance and opportunities.
In examining the global landscape, it is clear that some cultures produce many more entrepreneurs than others. To explore this phenomenon, we take a cognitive perspective because it is assumed that the way one thinks has a significant impact on the intention to start a new business. Through the development of this model we clarify why some Individuals across different cultures tend to be more prolific in starting new ventures than others both Inside and outside the home country. In illustrating the model, the Chinese population and their high propensity to start new businesses when they migrate to new countries are discussed. Implications for competitive advantage and other areas of cross-cultural research are made.
The relationship between ignorance and surprise and a conceptual framework for dealing with the unexpected, as seen in ecological design projects.
Ignorance and surprise belong together: surprises can make people aware of their own ignorance. And yet, perhaps paradoxically, a surprising event in scientific research—one that defies prediction or risk assessment—is often a window to new and unexpected knowledge. In this book, Matthias Gross examines the relationship between ignorance and surprise, proposing a conceptual framework for handling the unexpected and offering case studies of ecological design that demonstrate the advantages of allowing for surprises and including ignorance in the design and negotiation processes.
Gross draws on classical and contemporary sociological accounts of ignorance and surprise in science and ecology and integrates these with the idea of experiment in society. He develops a notion of how unexpected occurrences can be incorporated into a model of scientific and technological development that includes the experimental handling of surprises. Gross discusses different projects in ecological design, including Chicago's restoration of the shoreline of Lake Michigan and Germany's revitalization of brownfields near Leipzig. These cases show how ignorance and surprise can successfully play out in ecological design projects, and how the acknowledgment of the unknown can become a part of decision making. The appropriation of surprises can lead to robust design strategies.
Ecological design, Gross argues, is neither a linear process of master planning nor a process of trial and error but a carefully coordinated process of dealing with unexpected turns by means of experimental practice.
Entrepreneurship has emerged as a major research theme across a number of disciplines and fields, including the industrial dynamics tradition. Entrepreneurship is often seen as closely linked to firms and firm formation. However, the links between economic organization and entrepreneurship are unclear. Do entrepreneurs always need firms to realize their plans? If so, why? Can firms be "entrepreneurial"? If so, what is the difference between an entrepreneurial and a non-entrepreneurial firm? More broadly, how can entrepreneurship be informed by the theory of the firm and vice versa? These foundational issues in both the theory of the firm and the field of entrepreneurship have not been resolved. This dialogue between two scholars who have worked at the intersection of entrepre-neurship and the theory of the firm for more than 20 years addresses such key questions as: What is the meaning of "uncertainty" and what is its role? What are the features and roles of resources? How are resources linked to property rights and the firm? On what basis can we say that firms differ in the extent to which they are "entrepreneurial"? JEL classification: D8, D21, D23, L26
Microfoundations have become an important theme in recent macro-management research. However, the international management (IM) field is an exception to this. We document the lack of attention on microfoundations in IM research by focusing on knowledge sharing – a key IM research field – which we investigate by means of a keyword-based literature study of the leading IM and general management journals. We discuss possible reasons why microfoundations have so far met with less resonance in IM research. We point to the training and background of IM scholars as possible reasons. We also highlight the significance that IM scholars place on context and structure in explanation. These may be seen as contrary to a microfoundations perspective, a view that we show is incorrect. We end by identifying several microfoundational issues in IM research, calling for a sustained effort with respect to theory, heuristics, and empirics.
A classical approach to collecting and elaborating information to make entrepreneurial decisions combines search heuristics, such as trial and error, effectuation, and confirmatory search. This paper develops a framework for exploring the implications of a more scientific approach to entrepreneurial decision making. The panel sample of our randomized control trial includes 116 Italian startups and 16 data points over a period of about one year. Both the treatment and control groups receive 10 sessions of general training on how to obtain feedback from the market and gauge the feasibility of their idea. We teach the treated startups to develop frameworks for predicting the performance of their idea and conduct rigorous tests of their hypotheses, very much as scientists do in their research. We let the firms in the control group instead follow their intuitions about how to assess their idea, which has typically produced fairly standard search heuristics. We find that entrepreneurs who behave like scientists perform better, are more likely to pivot to a different idea, and are not more likely to drop out than the control group in the early stages of the startup. These results are consistent with the main prediction of our theory: a scientific approach improves precision—it reduces the odds of pursuing projects with false positive returns and increases the odds of pursuing projects with false negative returns.
This paper was accepted by Marie Thursby, entrepreneurship and innovation.
This chapter introduces the content of the book, presenting the key insights from the contributed chapters.
Purpose
The purpose of this paper is to call for inclusion of alternative but complementary conceptual perspectives in entrepreneurial decision-making theory and practice.
Design/methodology/approach
A conceptual approach, drawing on two sets of theoretical perspectives relating to decision making of entrepreneurs, is adopted.
Findings
The paper presents a conceptual framework of entrepreneurial decision making utilising the intersection between a metacognitive model of the entrepreneurial mindset and the recognition-primed decision-making theory. The paper argues that the convergence of these theoretical viewpoints provides a selection of decision-making processes for entrepreneurs in an uncertain business environment.
Practical implications
Decision-making models and tools are available to entrepreneurs; however, the relevance and applicability are restrained by the complexity and uncertainty of business environments in which entrepreneurs operate. New and more inclusive conceptual perspectives are required to improve the accuracy of decision making.
Originality/value
The study offers a framework that integrates two diverse theoretical dimensions of entrepreneurial decision making. The findings of this study provide direction for practice and for future research on entrepreneurial decision making. The paper intends to encourage researchers to support a new combined theoretical approach and to help practitioners better understand the reasons for entrepreneurial decision failure.
This paper presents an agenda for extending the theory of international business in order to explain a wider range of phenomena. This, however, has to be done with due attention to the requirements of good social science theory. Relevant criteria are set out, together with a list of issues that new theory must address. Theory needs to focus on industries as well as firms, and make greater use of formal multi‐actor models. ‘Generalizing from the particular’ should be avoided; theory needs to be derived from general social science principles that have proved successful in cognate disciplines.
Welcome to the special issue on Applying Experimental Methods to Advance Entrepreneurship Research! With this opening
article, we first articulate the importance of experimental methods to advance entrepreneurship research. We note the comparative
paucity of experimental methods in entrepreneurship, and the Journal of Business Venturing (JBV), in particular. We encourage
researchers – those with and without experience in experimental methods – to consider experiments as part of their methodological
toolkit, and we explain the benefits to the field for expanding our use of experimental methods. Doing so, we provide a reminder of
the importance of causality and explain why causality matters for the field of entrepreneurship.
We further posit that one reason for the comparative paucity of experimental methods in entrepreneurship research may be that
entrepreneurship research employing experimental methods is not surviving the publication process. We address this possibility by
offering practical advice for those seeking to publish experimental methods in entrepreneurship journals. Using exemplars from the
special issue, we outline five areas (joining a conversation, theoretical contribution, ecological validity, samples and representativeness,
and securing and enriching causal analysis) that may improve researchers' efforts to publish experimental research in
premier entrepreneurship journals such as JBV.
We conclude this opening article by introducing and summarizing the nine articles that comprise this special issue. Despite their
common focus on experimental methods, the articles represent a diverse set of theoretical and topical approaches and employ a wide
range of empirical approaches. Ultimately, we hope they encourage researchers in entrepreneurship to use experimental methods in
their research designs and to submit their best work to JBV.
Experimental methods provide important advantages for advancing academic understanding of entrepreneurship. Yet, the complex and comingled relationships between some of entrepreneurship's key characteristics pose thorny methodological challenges to entrepreneurship researchers – notably to negotiate important tradeoffs between the ideals of external and construct validity. To facilitate the sound mobilization of experimental methods in entrepreneurship research, we present an overview of critical validity challenges plaguing entrepreneurship research experiments and assess the validation practices mobilized in 144 studies using such methods. Building on these findings, we develop a practical guide of actionable validation strategies to help experimenters navigate the above tradeoffs and conduct entrepreneurship research experiments that are realistic, theoretically meaningful, and that help establish the causal effects of their focal variables. By doing so, we contribute a set of pragmatic means to support the mobilization of experimental methods for advancing entrepreneurship research. Executive summary: Experimental methods hold important advantages for advancing the theoretical and practical understanding of entrepreneurial action. The power of research experiments lies in their ability to yield convincing evidence supporting the causal effects of the factors they investigate. Unfortunately, entrepreneurship research experiments are often criticized for offering pale copies of both the realities they attempt to model and the theoretical constructs they aim to study. The entrepreneurial process and its related activities count many intertwined characteristics – such as radical uncertainty, temporal dynamics, high personal stakes and other constraints – that can prove difficult to integrate in experimental studies. Moreover, these characteristics' comingled relationships raise important tensions with experimental methods' core principle of surgically focusing on the causal effects of a few manipulated variables. As a result, entrepreneurship research must overcome a number of validity challenges and tradeoffs in order to successfully leverage experimental methods and offer findings that convincingly support the causality of their theoretical developments. Compounding these difficulties, the guidance typically offered in research methods textbooks tends to focus on generic issues that are altogether separate from the specific challenges of conducting valid entrepreneurship research experiments. Because of this, many research manuscripts mobilizing experimental methods arrive at the review process with important shortcomings. This threatens the field's knowledge accumulation and typically calls for authors to refine their work and collect additional data. To help researchers face these challenges, we offer a three-part compendium focused on bolstering the validity of entrepreneurship research experiments. First, we complement the generic observations of research methods monographs by presenting an overview of the validity tradeoffs inherent to mobilizing experimental methods in entrepreneurship research – and of strategies for addressing these. Second, and to demonstrate that overcoming these challenges is not a trivial task, we conduct a structured literature review of the external and construct validation strategies deployed in a comprehensive corpus of 144 relevant articles published in both entrepreneurship-focused journals and broader generalist journals from the applied behavioral and social sciences. Among the most positive elements emerging from our analyses, we note upward trends in the mobilization of pilot tests, in the conduct of multiple experiments within single papers as well as in the use of parallel studies using different data collection methods. We also observe increased efforts to explain the practical relevance of experimental findings. To our surprise, however, our analyses uncover downward trends in the mobilization of pre-tests to examine the research material's external validity and representativeness, as well as the continued publication of studies that do not report empirical evidence regarding their focal manipulations' construct validity. This is concerning. Such practices undermine these experiments' abilities to yield convincing evidence in support of their theorized causal effects – and for what these imply for fostering entrepreneurial action. Third, and in light of the results obtained, we develop a practical guide of actionable strategies for navigating the validity tradeoffs of entrepreneurship research experiments. Grouping these strategies together allows us to systematize recommendations typically found across various methods monographs, thereby offering an overall scheme to help entrepreneurship researchers navigate the validity tradeoffs inherent to conducting realistic and theoretically meaningful experiments. To make our recommendations as actionable as possible, we develop an extensive step-by-step guide of design and assessment strategies relevant to entrepreneurship research experiments. The guide spans the entire research process – from conceiving an experimental study to collecting, analyzing and reporting the results. The guide also includes a number of relevant exemplars from many different studies we analyzed. By discussing these entrepreneurship-specific validity tradeoffs and combining that with an overview of strategies for addressing them, our study offers an entrepreneurship-centered synthesis that equips entrepreneurship researchers with the necessary tools for conducting experimental research that advances understanding of the causal effects supporting entrepreneurial action and its related phenomena.
Purpose
The purpose of this paper is to explore uncertainty-coping strategic actions in the internationalisation strategy of entrepreneurial ventures, encompassing born globals/international new ventures, enduring established internationalisers, old born globals, born-again globals and micro-multinationals.
Design/methodology/approach
The authors developed a qualitative exploratory study applying a grounded theory approach to ten entrepreneurial firms to investigate the strategies they adopted to cope with Knightian uncertainty in international markets.
Findings
The global niche strategy emerged as a successful path to deal with uncertainty in smaller firms’ internationalisation. The authors uncover the components of this strategy, namely the creation of markets, the focus on global clients and the control of technology.
Originality/value
The contribution of this paper consists in exploring how entrepreneurial firms cope with uncertainty through a global niche strategy and in outlining its main components. The authors develop a model of smaller entrepreneurial firms’ international strategising under this perspective. The research thus links together international marketing and strategy with (international) entrepreneurship studies.
Bayesian decision theory and inference have left a deep and indelible mark on the literature on management decision-making. There is however an important issue that the machinery of classical Bayesianism is ill equipped to deal with, that of “unknown unknowns” or, in the cases in which they are actualised, what are sometimes called “Black Swans”. This issue is closely related to the problems of constructing an appropriate state space under conditions of deficient foresight about what the future might hold, and our aim is to develop a theory and some of the practicalities of state space elaboration that addresses these problems. Building on ideas originally put forward by Bacon (1620), we show how our approach can be used to build and explore the state space, how it may reduce the extent to which organisations are blindsided by Black Swans, and how it ameliorates various well-known cognitive biases.
Experimentation is paramount to innovation. In fact, innovation scholars and practitioners have espoused Thomke's (2003) book titled Experimentation matters: Unlocking the potential of new technologies for innovation. Unfortunately, companies still experience considerable technical and managerial difficulties with organizing experiments under high uncertainty. This study confronts Thomke's experimentation principles with a high uncertainty context by examining experiments conducted by The Manhattan Project from 1943–1945, the initiative that created the first implosion‐type fission bomb. Findings suggest that lack of theoretical knowledge, a crisis of scientific instruments, and absence of pre‐established organizations were critical to such highly uncertain experimentation. We conclude with a discussion of the boundary conditions of Thomke's experimentation principles. Finally, we propose five principles for facilitating the management of experimentation in the unknown.
Building on a perspective of the entrepreneur as an interpretive agent, we argue that in situations where there is absolute uncertainty, heuristics are useful design rules that aid entrepreneurs’ judgment by synthesizing mental models and expectations to enable purposeful action. This is because decisions under absolute uncertainty pertain to subjective judgments of both outcomes and options. In contrast, objectively rational decision heuristics are useful under predictable risk. Our argument provides balance to the extant literature, which, due to the overemphasis on biases and an unrealistic view of uncertainty in entrepreneurial decision making, often overlooks the positive role of heuristics.
Research on entrepreneurial learning highlights the importance of experience and prior knowledge to entrepreneurial success. However, a conundrum remains and we are still seeking answers as to why some novice entrepreneurs learn successfully from their experiences and succeed, while some experienced entrepreneurs fail with their ventures. In order to advance the discussion about the role of experience during entrepreneurial learning, our critical reflection aims to (1) highlight some of the shortcomings of experiential learning theory (ELT) and (2) illustrate how alternative theoretical perspectives have the potential to advance our conceptual understanding of entrepreneurial learning processes. We argue for an explanation of entrepreneurial learning as a dynamic and self-regulated process that relies on planning, monitoring, and self-reflection.
Purpose
Business Plan Competitions (BPCs) are readily prescribed and promoted as a valuable entrepreneurial learning activity on university campuses worldwide. There is an acceptance of their value despite the clear lack of empirical attention on the learning experience of nascent entrepreneurs during and post-participation in university-based BPCs. To address this deficit, the purpose of this paper is to explore how participation in a university-based BPC affords entrepreneurial learning outcomes, through the development of competencies, amongst nascent entrepreneurs.
Design/methodology/approach
Underpinned by a constructivist paradigm, a longitudinal qualitative methodological approach was adopted. In-depth interviews with nascent entrepreneur participants of a UK university-based BPC were undertaken at the start and end of the competition but also six months after participation. This method enabled access to the participant’s experiences of the competition and appreciation of the meanings they attached to this experience as a source of entrepreneurial learning. Data were analysed according to the wave of data collection and a thematic analytical approach was taken to identify patterns across participant accounts.
Findings
At the start of the competition, participation was viewed as a valuable experiential learning opportunity in pursuit of the competencies needed, but not yet held, to progress implementation of the nascent venture. At the end of the competition, participants considered their participation experience had afforded the development of pitching, public speaking, networking and business plan production competencies and also self-confidence. Six months post-competition, participants still recognised that competencies had been developed; however, application of these were deemed as being confined to participation in other competitions rather than the routine day-to-day aspects of venture implementation. Developed competencies and learning remained useful given a prevailing view that further competition participation represented an important activity which would enable value to be leveraged in terms of finance, marketing and networking opportunities for new venture creation.
Research limitations/implications
The findings challenge the common understanding that the BPC represents an effective methodology for highly authentic, relevant and broadly applicable entrepreneurial learning. Moreover the idea that the competencies needed for routine venture implementation and competencies developed through competition are synonymous is challenged. By extension the study suggests competition activities may not be as closely tied to the realities of new venture creation as commonly portrayed or understood and that the learning afforded is situated within a competition context. Competitions could therefore be preventing the opportunities for entrepreneurial learning that they purport they offer. Given the practical importance of competition participation as a resource acquisition activity for nascent entrepreneurs, further critical examination of the competition agenda is necessary as too is additional consideration about the design of such competitions and how such competitions should feature within university policy to support new venture creation.
Originality/value
This study contributes to the limited literature and studies on BPCs by focussing on its effectiveness as a means of providing entrepreneurial learning for participants. The key contribution taking it from an individual nascent entrepreneur participant perspective is that the competencies afforded through competition participation are more limited in scope and application than traditionally promoted and largely orientated towards future BPC participation. Learning is mainly situated for competition sake only and about participants securing further resources and higher levels of visibility. As the nascent entrepreneurs intended learning outcomes from competition participation are subsequently not realised, the study highlights a gap between the intended and actual outcomes of competition participation.
Purpose
Managerial mindset and cognitive bias can be barriers to any transformation strategy. In the case of telework, most employees express willingness to telework, yet, few firms formally enable it during regular business hours. The status quo is a daily commute to the traditional workplace. The purpose of this paper is to test framing interventions designed to harness cognitive biases through choice architecture.
Design/methodology/approach
Drawing upon behavioral strategy and prospect theory, this paper presents two studies: quasi-experiments with 146 senior business students and experiments in the field (replication using random assignment and extension) with 84 senior decision makers. Both studies use a one-way between-subjects design and chi-square analysis.
Findings
Findings support the proposition that, although cognitive biases can act as barriers to transformation, they can be re-framed through strategic interventions. Specifically, in both studies, there was a drastic increase in adoption simply by changing the way the choice was presented. Findings in the lab were cross-validated in the field. Observed shifts in preferences provide evidence that embedding the right reference point within communications can frame a decision choice more favorably. Findings also support that a bias for an implicitly perceived status quo can be overruled through an explicitly stated reference point.
Research limitations/implications
It is an assumption of behavioral strategy that most individuals simply respond to the gains/loss framing without being influenced by other psychological or contextual factors, and though these effects dissipate through aggregation, it is a limitation nonetheless. Indeed, using an individual construct to explain an organizational phenomenon is a well-debated topic in the field of strategy, with proponents on both sides. The distinguishing factor, here, is that behavioral strategists are only interested in results at the aggregated level.
Practical implications
Practitioners attempting to roll out telework adoption, or any transformation, now have proven strategies for designing frames of reference that intervene against and harness the power of loss aversion and the status quo.
Social implications
This paper measures micro processes that have an effect at the macro level. It explains systematic aversion to adoption as an aggregation of decision-making behavior that is seemingly subconscious. In doing so, it highlights the impact of bounded rationality perpetuated through social systems, while measuring effective interventions designed to make systematic behavior more predictable.
Originality/value
A novel contribution is made in designing/testing a new frame for systematic resistance to change that frames the status quo as the losing prospect. In this frame, the perceived loss is in the choice not to change, and loss aversion proves to be an effective tool for facilitating systematic change.